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Thursday, 27 August 2015

Achieve Saving on Indirect Spend

Indirect spend often accounts to 50% or more of a company’s total purchases
and are characterized by large supplier base, low volume purchases and a
diverse stakeholder spread across the organization. With almost two-thirds of
procurement organizations influencing less than 70% of indirect spend, gaining
influence over indirect spending will be the key to achieving sustained or increased savings contributions for most procurement groups. In this blog I will be sharing some of the key measures procurement groups can
adopt to tame their indirect spend.

Pursue and issue corporate policies mandating that
specified work streams be used in order for suppliers to be paid and conduct comprehensive
communications campaignsto roll out and periodically reinforce these
policies.

Classify and segment spend categories into specific work
streams; then partner with finance and accounts payable to devise explicit
response and escalation protocols for addressing all parties buyers and
suppliers to transactions taking place outside of specified work streams. For
example, pay first instance with warning, pay second instance with disciplinary
action or note in personnel file, decline to pay third instance and any
transactions thereafter.

Continue to work toward improving spend visibility, analytic and
reporting to lay groundwork for future business cases; use eRFx and
other efficient supplier information management tools to support in-depth
market scans that identify game-changing new entrants and disruptive forces
that might be leveraged to generate cost savings, improved service levels and
so forth.

Network and benchmarkwith procurement teams in other
companies to understand which indirect categories and which specific
supplier, they have succeeded in moving toward more structured competitive
sourcing and spend management disciplines; prioritize to leverage work already
done by trailblazers in such indirect spending categories as telecommunications
hardware and services, contingent workforce, advertising, marketing and
communications services, legal services, human resources and so forth.